Calls for ‘outright ban on absurd’ mid-contract telecoms price rises

Ofcom is facing calls for an “outright ban” on “absurd” mid-contract price hikes after the Government separately asked the regulator to revisit its rules on the practice.

The calls follow O2 unexpectedly announcing it was raising prices by £2.50 a month for existing customers.

On Monday, Technology Secretary Liz Kendall wrote an open letter to Ofcom bosses asking them to review mid-contract price rises again.

She wrote: “As we discussed when we met earlier this month, driving down inflationary costs and protecting consumers are vitally important for this government.

“As such, I welcome both the action you took in January to increase transparency on how in-contract prices are presented in new contracts, and your statement yesterday expressing disappointment with O2’s price rises.

“I strongly agree they are against the spirit of your previous changes on pricing, and all the more disappointing given the current pressures on consumers.”

She added: “Nevertheless, I believe we need to go further, faster. I am keen that we look at in-contract price rises again.”

Ofcom has been given until November 7 to respond to Ms Kendall’s letter.

Ofcom said: “We share the Government’s concern that customers who face price rises must be treated fairly by mobile providers and they are empowered to exercise their right to switch penalty-free if they didn’t agree to them upfront.

“We will respond to the Secretary of State’s specific queries shortly.”

O2 said in a statement: “We appreciate that price changes are never welcome, but we have been fully transparent with our customers about this change, writing directly to them and providing the right to exit without penalty if they wish.”

Ofcom introduced new rules in January to crack down on phone and broadband providers increasing prices in the middle of a contract without warning.

But last week, O2 announced it would be raising its monthly prices by more than originally promised.

It was able to do this because the increase was not linked to inflation, and it has given customers 30 days to leave without penalty providing they continue to pay off the cost of their device.

O2 said it has not gone against the regulation and Ofcom’s rules do not stop providers from raising prices.

The firm said: “A price increase equivalent to 8p per day is greatly outweighed by the £700 million we invest each year into our mobile network, with UK consumers benefitting from an extremely competitive market and some of the lowest prices compared to international peers.”

Alex Tofts, broadband spokesman from comparison site Broadband Genie, said: “What we’re seeing from O2 and price rises from other major providers is a direct result of crude regulation that has been poorly thought out, with its implications not given enough consideration.

“The only real way to protect customers is to outright ban these absurd mid-contract price hikes. Some providers already offer fixed prices, so why can’t those with the biggest profit margins do the same?

“We fully back the call for Ofcom to revisit these regulations. Until then, we urge all consumers to check whether they’re still in contract.

“To be fair to Ofcom, the broadband switching process has become much easier thanks to the One Touch Switch system. One-in-three households are currently free to switch, and with many providers offering competitive new-customer discounts, now could be the best opportunity to protect your budget before further price rises take effect.”